Bill: Tax Reform Act of 4269
Votes: This bill proposes to change income taxes. It requires more than half of the legislature to vote yes. This bill will not pass any sooner than the deadline.
Voting deadline: December 4271
|Proposed by George Llewellyn, Senator from Gavonshire, AFP Deputy Treasurer|
This income tax proposal seeks to reduce the income tax burden on the Alorian people in favor of a higher tax on luxury goods, and is projected to remain revenue neutral. It is believed by economists that consumption taxes distort the economy less than taxes on income, and a shift to this sort of taxing will allow the Alorian economy to become more efficient and prosperous.
A consumption tax will tax goods and services while an income tax creates a disconnect between the value of an individual's labor and how much is actually produced. Thus, the income tax creates greater distortions in the economy, also taxing savings as income.
The current situation also taxes those Alorians with very low incomes, putting undue stress on low income Alorians. It is also worth noting the current tax on essential goods remains 0 under our plan, so low income Alorians will see their income tax reduced to 0 and their necessities will remain untaxed.
As of the time of this writing, the current income tax scheme produces 95,741,861,737 ALO per year, while the new scheme will produce a projected 85,519,000,000 ALO in revenue. This means, in order to be revenue neutral, a new stream of income must be provided. This is accomplished by increasing the luxury goods tax from 6% to 15%. This, while a big one time increase, is not out of line with the luxury tax rates in many other countries. There are approximately 31 countries with luxury goods taxes above 15%.
The current Alorian luxury goods tax rate of 6% produces 7,620,311,309 ALO yearly in revenue. We need to then increase the luxury tax such that it produces approximately 10,222,861,737 more revenue, or 17,843,173,046 in total revenue from the tax. The average amount produced from each percent of tax on luxury goods is 1,270,051,884.8 ALO in revenue created yearly from each percent taxed (7620311309/6). If we can expect constant returns from our increasing of the luxury goods tax rate, then we need a 14.04% tax rate on luxury goods (17,843,173,046/1,270,051,884.8=14.04). Since increasing taxes on goods should decrease the consumption of the good, the new bill proposes an increase to a 15% luxury goods tax rate.
(OOC: Also the game mechanics only allow tax rates which are round numbers.)
Who sees a tax cut?
All Alorians making under 3500 ALO per year will see a complete elimination of their income taxes. Some of these Alorians are taxed up to a 14% marginal rate.
A line graph which illustrates the differences between the old and new tax proposals can be found here:
The marginal tax rate is on the Y-axis and their income bracket is on the X-axis.
It is also worth noting that while the marginal tax rates may seem to be increased for some Alorians, these Alorians may see an effective tax cut.
Take, for example, an Alorian who has a before-tax income of 5,500 ALO. Under the old plan, the marginal tax bracket this person falls in is 16% of income for all income made after 5,000 ALO. Under the new plan, this person's marginal tax rate is
20% of before-tax income after 5,000 ALO. But how much tax is this person truly paying? Under the new tax plan, this person pays 210 ALO in taxes and all their income under 3500 ALO is not taxed. Under the current regime, this person pays 580 ALO. This person will see a significant reduction in tax burden.
We propose to alter income tax brackets to the following setup. Information about the current income tax system can be found here.
|> 3,500 ALO||2%||582,000,000 ALO|
|> 4,000 ALO||10%||5,233,000,000 ALO|
|> 5,000 ALO||20%||4,299,000,000 ALO|
|> 5,500 ALO||22%||4,396,000,000 ALO|
|> 6,000 ALO||30%||10,518,000,000 ALO|
|> 7,000 ALO||32%||16,164,000,000 ALO|
|> 9,000 ALO||35%||7,311,000,000 ALO|
|> 10,000 ALO||37%||5,912,000,000 ALO|
|> 11,000 ALO||38%||5,708,000,000 ALO|
|> 12,500 ALO||40%||8,207,000,000 ALO|
|> 15,000 ALO||45%||13,763,000,000 ALO|
|> 21,000 ALO||50%||2,249,000,000 ALO|
|> 25,000 ALO||55%||1,067,000,000 ALO||Total||85,409,000,000 ALO|
These messages have been posted to debate on this bill:
|Date||23:39:02, September 09, 2017 CET||From||Plaid Ffederaliaeth a Rhyddid||To||Debating the Tax Reform Act of 4269|
|Message||Until the AFP gains more proposals, this tax reform plan will have to sit in debate.|
|Date||00:05:17, September 10, 2017 CET||From||Plaid Ffederaliaeth a Rhyddid||To||Debating the Tax Reform Act of 4269|
|Message||Also, it is a sad day when the ANC has voted against the Government's Alorian Reform Act of 4269, gridlocking the Senate and keeping vital legislation like this from being passed.|
|Date||13:04:23, September 10, 2017 CET||From||Parti Libertaraidd Newydd (PLN/NLP)||To||Debating the Tax Reform Act of 4269|
|Message||We would call upon the government to look into readmitting the bill. Hopefully the RSF will support the bill in the future and cancel out any opposition from the ANC. I would hope that the government are or will be contacting the RSF to court their support for the bill in order to receive a two-thirds majority.|
|Date||13:51:17, September 10, 2017 CET||From||Conservative Party||To||Debating the Tax Reform Act of 4269|
|Message||We support the reductions in income tax. Raising the lowest tax band to 3,500 ALO is very important, and it will reduce the tax burden on the poorest in our society. However, we don't support the sharp rise in luxury goods sales tax. Senior ALP party officials will meet and come to a decision in the near future.|
|Date||21:58:31, September 10, 2017 CET||From||Plaid Ffederaliaeth a Rhyddid||To||Debating the Tax Reform Act of 4269|
|Message||Senator Greenway, we applaud your support for this bill. Cross-party support would inevitably create a situation where this bill can be celebrated as a victory for not only the Labor-AFP coalition, but for the entire nation. The RSF are avowed socialists, but we would dearly hope that they can support a bill which improves the economic situation on a broad basis |
The ALP Leader Wehnert must understand that we have been tasked with creating a revenue neutral tax bill, and that the raise in sales tax would put the government in a much better fiscal position than if we removed the lower brackets without a raise in revenue. While it would of course be ideal to have our cake and eat it too, the current fiscal and political situation makes it impossible to do this. The sales tax will be economically less harmful, and in the long run we hope to see a further move shift towards consumption taxation and away from income taxation.
Senator from Gavonshire
AFP Deputy Treasurer
|Date||22:00:07, September 10, 2017 CET||From||Plaid Ffederaliaeth a Rhyddid||To||Debating the Tax Reform Act of 4269|
|Message||It is of course impossible for us to propose this bill at this time, as the exceptionally restrictive measures imposed on parties in the Senate has driven us into gridlock.|
|Date||16:25:03, September 11, 2017 CET||From||Conservative Party||To||Debating the Tax Reform Act of 4269|
|Message||I understand the reasons for the rise in the luxury goods sales tax, but we would rather see budget cuts to balance the budget instead.|
|Date||18:17:06, September 11, 2017 CET||From||Labor Party||To||Debating the Tax Reform Act of 4269|
|Message||We will oppose cuts as part of any budget deal. This is an effort to restructure the tax code, not upend Alorian government,|
|Date||18:46:38, September 12, 2017 CET||From||Plaid Ffederaliaeth a Rhyddid||To||Debating the Tax Reform Act of 4269|
|Message||While the AFP in principle supports cuts, the political will does not exist at the moment.|
|Date||19:32:46, September 12, 2017 CET||From||Parti Libertaraidd Newydd (PLN/NLP)||To||Debating the Tax Reform Act of 4269|
|Message||As the Tax Reform Act of 4269 is put to the vote, the CDR/LDA would again call upon all parties to back this proposal from the AFP, in order to see a clear and coherent tax system. Whilst we share the concerns of the ALP for the rise in luxury tax, I feel that this could well be amended in the future. Our concerns aside, this bill needs to pass, and commonsense dictates that we should put aside differences and support a vote that would be viewed, as Senator Llewellyn rightly said, as a victory for the nation.|
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|Random fact: Voters have an extra appreciation for bills that actually get passed, so if you want to maximally take profit from your votes, make sure you compromise with others.|
|Random quote: "Since a politician never believes what he says, he is quite surprised to be taken at his word." Charles De Gaulle (1890 - 1970)|